Association heads question CBA’s new two-year rule

From next year, all new brokers seeking accreditation with the big four bank will be required to meet the following standards:

- Hold at least a Diploma of Finance and Mortgage Broking Management 

- Have at least two years’ experience writing regulated residential loans

- Be a current member of either the Mortgage & Finance Association of Australia (MFAA) or the Finance Brokers Association of Australia (FBAA)

- Be a Direct Credit Representative or employee of an approved Aggregator/Head Group or Australian Credit License (ACL) holder

Divided over Cert IV/Diploma attitudes

Speaking to The Adviser following the announcement, both the heads of the mortgage broker associations agreed that education and raising standards was key, but they were divided over the big four bank’s attitude to the Certificate IV Finance and Mortgage Broking (which CBA’s general manager for third-party banking, Sam Boer, said had “served its purpose”).

The CEO of the MFAA, Mike Felton, supported the move, saying: “I think education is the absolute bedrock of professional recognition, which is why it was a strong focus of the Combined Industry Forum’s proposals this year.

“We were looking to drive broker competency, ensure minimum educational content at events and implement a strong remedial education program to address behaviour where required.

“The MFAA is supportive of moves to raise the industry’s minimum education level to the level of Diploma. This will assist in elevating professional standards within the industry, which needs to be an ongoing focus.”

The association currently accepts members with Cert IV qualifications, but it requires that new brokers complete, within 12 months of joining the MFAA, the Diploma – Finance and Mortgage Broking Management.

However, the executive director of FBAA, Peter White, said that the Cert IV still had its place.

Mr White told The Adviser: “We know that the Cert IV that we provide to our members through AAMC is brilliant quality, and so is their diploma. You have to get the foundations right when you start in this industry, and if you don’t get the foundations right, it doesn’t matter what you build on top of it. You must get the foundations right first, which is why Cert IV has to stay. 

“These good-quality courses are an entry point, and that is what they have always been designed for.”

The FBAA head continued: “We won’t be changing our position on our minimum membership requirement, being a Cert IV, and I will challenge government and regulators until I’ve lost every tooth in my mouth to any changes to this minimum standard. Because people have to take the first step. You cannot expect someone who has never swum before to jump in the deep end and not drown.”

Further, Mr White said that he believed the Diploma was the course that “needed work”, stating: “I don’t see that the Diploma brings anything of significant value to somebody who is just starting off in the industry writing home loans… Some of the things in the Diploma are probably a bit lightweight these days, which could do with some looking at.”

United in concern over two-year requirement 

However, both Mr Felton and Mr White were united in voicing concern at the upcoming requirement for new brokers to have at least two years of experience before becoming eligible for accreditation with CBA.

The MFAA CEO said: “If we’re going to expect new brokers to have the knowledge and skills to produce good consumer outcomes and represent the industry appropriately, all stakeholders need to invest in the professional development of brokers who are new to the industry. 

“Limiting accreditation for two years creates barriers to entry, which — if other lenders followed suit — could inhibit the ability of new brokers to earn an income or gain the required experience. Obviously, we need to find solutions in this area that all parties are comfortable with and a strong mentoring framework would appear to be a critical part of that.”

Likewise, Mr White said: “CBA is a very solid institution in the home loans sector, but I just don’t think that this has been well thought through. If you look at people who are new to industry — look at the 30 Under Thirty ranking — there are a lot of people in there who have only been in the industry for 18 months and are under that two-year bracket, and they are the future stars of broking and are writing significant volumes and good-quality loans. 

“[CBA is] turning [its] nose on those who are starting in this part of the industry… What is going to happen with CBA, in my mind, is that all these brokers that they have turned their back on will take their business elsewhere. They will build relationships with other lenders. And I can’t see someone who hasn’t written a loan with them for two years turning around on their third year of business and suddenly start writing home loans with CBA. Why would they get accredited when they have already got accreditations and relationships elsewhere? And that’s whether or not they have a diploma. So, I don’t think CBA are doing themselves any great service by it.”

He added: “Imagine if, five years from now, half of all brokers decide to retire. If CBA has turned its back on new entrants for the past two years, they are not going to get their business, so they will have a shrinking broker portfolio. That’s the risk they run. Because they haven’t invested time into building that relationship at the beginning point, when it is so important.”

Mr White added that he believed “forcing someone to go through education” would also be detrimental, as it could mean that people do it without the right attitude/attention to detail and could undertake the Diploma “with minimal effort just to get it done”.

Mr White concluded: “The Combined Industry Forum response was all about creating good consumer outcomes, and I don’t think a good consumer outcome is restricting choice to brokers.” 

[Related: CBA to change commission structure by 30 June 2018]